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INDIAN ECONOMY DRIER THAN FORECAST

Kunal Kumar Kundu

Asia Times, September 4, 2009

BANGALORE - India's 6.1% economic growth over the three months through June, announced this week, had many analysts optimistic at the prospects for the rest of the fiscal year, even though the figure was down from 7.8% in the year-earlier period and took no account of a deepening drought.

The Central Statistical Organization (CSO), releasing the figures on Monday, said the drought would be reflected in the coming quarters, but that the economy "can still clock over 6% growth" over the fiscal year that ends March 31, 2010. Even Montek Singh Ahluwalia, deputy chairman of the Planning Commission, said in reaction to the figures that the worst may be over. "We expect GDP [gross domestic product] growth to improve in the subsequent quarters," Ahluwalia said.

A closer look at the data makes it clear that the government is speaking on an agreed line to shore up sentiment, rather than commenting on reality.

First, take the agricultural sector, in which in this year's fiscal first quarter (April to June), growth slowed to 2.4% from 3% a year earlier and was down from 2.7% in the immediate previous quarter. This in itself need not be bad, except that the data reflect the Rabi, or spring, crop only, which was not affected by drought. The effect of the severe drought on the Khariff, or summer monsoon, crop, is yet to be recorded and this is going to take a major hit in the coming quarters.

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